Haze and the quest for a new growth model

Haze continues to envelop parts of Kalimantan, where a smallholder oil palm farmer named Supendi battles the consequences of raging forest fires. However, Supendi's struggle extends beyond the haze, as the El Niño weather phenomenon has shrunk the Kapuas River, an essential transportation route for oil palm products. This disruption has left his fruit unsold, threatening his livelihood.

Indonesian authorities have named 20 corporations as suspects in this year's fires, with slash-and-burn clearing being an illegal yet cost-effective method of clearing land for planting. Climate change has exacerbated the situation, turbocharging El Niño and contributing to Indonesia's worst fires in over a decade.

Blaming palm oil for the fires is relatively easy, but the harder task lies in recognizing that the crop also sustains millions of families. Clearing the air also requires finding alternative ways to generate income. Indonesia's economy remains heavily reliant on commodities such as palm oil and coal, which account for more than half of the country's exports.

This resource dependence is both an environmental and an economic issue, as research shows that a country's export basket complexity is a better indicator of income per capita than education or government quality.

Countries that rely on low-complexity commodities, such as palm oil, tend to lag behind those with more sophisticated products. Japan, South Korea, China, and Vietnam, among others, have risen to prominence by developing their capability for producing complex goods. As manufacturing once played a significant role in Indonesia's economy, creating middle-class jobs, its share has declined from over 30 percent in 2002 to under 20 percent in recent years. This decline has hindered job creation and contributed to the country's economic challenges.